Navigating the junior investment ISAs minefield

Goldust

Hi,


As interest rates are nothing special and I don't mind taking a few small risks I've been looking for a while at putting some money for our daughter into a junior investment ISA.


Scottish Friendly are offering £120 cashback for a £1000 lump sum investment (which is around the amount I want to put in intially) but I presume that is clawed back and more besides over the years. A quick forum search doesn't give them very favourable feedback either.


So the question is, how do I find the best one? I've found some information online but a lot of it is out of date. I'm just looking for some guidance about other's experiences, what to look for and what to avoid.


TIA

Alexland

Goldust wrote: »

As interest rates are nothing special and I don't mind taking a few small risks I've been looking for a while at putting some money for our daughter into a junior investment ISA.

Interest rates on Cash JISAs are special. Coventry Building Society at 3.6% is comfortably above inflation so providing a real return with no risk to capital.

To get the same payback on a low cost investment JISA account (eg Vanguard Investor after paying 0.15% platform fee and around 0.22% fund manager fee) you would need the investments to return around 4%.

Vanguard, one of the world's biggest and most respected asset managers, published their latest 10 year forecast that at current market valuations (asset prices driven high by low interest rates) they expected global bonds to deliver around 1% pa and shares to 'only' deliver around 4.5% pa.

So unless you want to go 100% shares (with no bonds) to get that extra estimated 0.5% pa return at risk of 50% loss of capital during market crashes a traditional portfolio of shares and bonds looks likely to underperform the Coventry rate.

On that logic I transfered my children's investment JISAs accounts into Cash JISAs. We still take plenty of investment risk with bigger money in our adult accounts as we don't have access to such good cash rates. I think of the children's accounts as the lower risk part of our family's portfolio.

Alex